5 Factors to Consider When Refinancing Your Self-Storage Loan

You’ve weathered the financial storm and the turbulence in our industry, and your self-storage property is back on track and performing well. Interest rates are down and banks (and other types of financial institutions) are lending. Now’s the time to refinance your facility if you haven’t already done so.

Most self-storage owners know the cost and terms of borrowed capital are significant and can make or break any project. Most lenders only want to know two things: How much do you want to borrow, and how are you going to pay it back? Owners with good-performing, stabilized properties can now negotiate loans with excellent terms and interest rates. Here are five important factors that can put you on track to get a great deal from your lender.

The Loan Request

Probably the most overlooked document in the whole loan-submission process is the one-page cover sheet stating how much you want to borrow, the legal name of the borrower, the proposed terms of repayment, the proposed rate, the collateral to secure the loan and the guarantors (if any). Your cover sheet should look similar to this:

Amount: $2,500,000

Borrower: Storage Investors LLC

Amortization: 20 years (fixed rate for the first five)

Rate: 4.5% (payment of $15,816.23 each month)

Collateral: First mortgage on 50,000-square-foot self-service storage facility at 5552 Main St., Atlanta

Guarantors: Personal guarantees of Mr. and Mrs. Sims

The Self-Storage Financials

You need to pull together the last three years of tax returns for your store. Look at the documents and make footnotes to highlight significant income or expense items. Recalibrate the tax returns as a quick, one-page recap to show net rental income like the example below.

Be sure the numbers you show tie directly to your tax returns. You may want to note that you’ve been making nice gains in revenue while operating expenses (all costs to operate the self-storage facility less depreciation, amortization and interest expense) have been held to small increases.

You also might note that you were able to increase rates on several unit sizes, or that you were able to collect a greater percentage of late fees. Whatever your numbers are, make some footnotes to summarize what you’ve been doing to financially strengthen your facility over the past couple of years. Your numbers may look much better than the example shown, so all the better for you!